Ep #64 Tax Tips for Online Business Owners

Posted on 29. Oct, 2008 by Elizabeth Potts Weinstein in Finance, Radio Show

Kristine McKinleyElizabeth speaks with Kristine McKinley, CFP®, CPA and Founding Principle of Beacon Financial Advisors, LLC who shares her tax tips for online business owners. Kristine shares her 5 tips to get ready for taxes, when to treat your business like a business rather than a hobby and why, as well as how your profit intentions affect your taxes. 

Elizabeth then answers a listener question about when you need to have a Tax ID Number (EIN) and her Entrepreneur’s Success Tip of the Week: The Art of Connecting, Fifth in the Series The Art of Social Networking.

Click here to learn more about Kristine and get valuable tax tips for your online business . If you’d like more information on getting your own EIN visit the IRS site. 

Click here to download the show!

Elizabeth Potts Weinstein welcomes small business owners, entrepreneurs and anyone who dreams of opening a business someday to this empowering hour of the Wealth Spa Radio Show where you’ll find answers to your most pressing financial and legal questions.  Now here is your host, Elizabeth.

Elizabeth:      Welcome everyone.  This is Elizabeth Potts Weinstein your host for the Wealth Spa Radio Show and this is episode 64 for anybody who’s keeping track or want to make sure you’re listening in the right order.  And today we’ve got a couple of different things going on like usual.   First, we’re going to have our guest Kristine McKinley who is a certified financial planner and a CPA.  We’re going to be talking about tax tips for online business owner.  Next, the second half of the hour, I’ll be answering a question from one of you all which is about tax id number or EIN numbers here in the United States.  Do you need that, when do you need that.  And this is one of the most popular articles on my website actually.  So I want to go through that questions cause I get asked that a lot.  There’s a lot of misconception.  And then as we get close to the top of the hour, we’ll be doing the Entrepreneur’s Success Tip for the Week.  This week’s tip is the fifth in the series on the Art of Social Networking.  And this tip is on the Art of Connecting.  So before we get started on today’s content, I just want to remind if you’re going to miss any part of the show or you miss a link that we talked about or you want have future shows deliver to you automatically so you don’t have to know when and where to listen, you can go to thewealthsparadioshow, actually we have a new website now, you can go to thewealthspa.com.  Actually the old still one will get there too.  Go to thewealthspa.com where you can sign up to have shows delivered to you automatically by email, rss feeds or iTunes.  You can listen to past shows, you can even read a lot of the past shows have been transcribed and the transcriptions are going up there too.  And if you miss a link that we talked about on the show, there’ll be up there on the site.  Typically they go up, the shows will go up on our own website between 6 and 24 hours after the show is live.  So either Wednesday afternoon or Thursday the shows go up on there.  So let’s get into today’s guest.  We’ll go ahead and introduce her.  I’m going to switch to the next page, so Kristine McKinley is a CFP and a CPA.  She’s the founding principle of Beacon Financial Adviser, LLC which is an independent the only financial planning firm in Lee’s Summit, Missouri.  She’s a certified public accountant, a certified financial planner.  She is of course a homebased online business owner herself.  And so as a small business owner she understands all the unique tax issues and financial issues we have and specializes in providing tax prep, tax planning, financial planning, eBay seller, work at home mom, coaches, virtual assistant, and other online businesses and homebased assistant.  So thank you so much for being on the show with us today Kristine.

Kristine:         Thank you for having me.

Elizabeth:      Great.  So you know talking about and actually let me just flip over to what we’re talking about today, I might get myself on the right page.  Talking about small business owner, a lot of business owner, people are starting business online.  And maybe they start a blog or they start selling stuff on eBay starting up small kind of as side hobby.  At what point do we need to change how you’re doing things.  At what point does a hobby becomes a business or should you always start treating things as a business from the beginning.

Kristine:         Well there’s a common misconception that if you only have a hobby or if you don’t earn a certain amount of money like if you learn less than $600 that you don’t have to pay tax on that income and that is totally not true.  Basically all income earned whether it’s online or offline or selling on eBay or advertising on a blog is subject to tax from day 1.  So we should be treating any hobby as a business from the first day.   

Elizabeth:      So if someone let’s say they are cleaning up their garage and they have a  garage sales and they sell a bunch of stuff on eBay and they did that already, those on the show now, at what point do they need to be worried to go back and try to figure out what they did before.  

Kristine:         Well it depends on if they were just cleaning out you know garage or if they are actually going out and buying stuff to sell on eBay.  If you’re truly just cleaning out your garage then that’s not a business.  So you don’t have to worry about sometimes during 2008 you had a garage sales or you sold anything that was left from you garage sale on eBay because most likely you paid more for those items to begin with than you sold them for if they’re truly just personal items from around the house.  But the minute that you go out and buy something with the intent to turn around and sell it on eBay, you got a business.

Elizabeth:      So if someone goes to Target and they have Wii there on sale and they buy three of them cause they have them on stock, and then they go sell them on eBay for $400 even though they don’t consider themselves a business owner or whatever, they’re making a profit.  So as such is a little mini-business.

Kristine:         Yep.  That’s right.  The minute you have the intention to make a profit, that’s a business.  So even if you don’t have a formal business setup if you do anything online with the intent of making a profit, you’re in business and you have to follow the rules.

Elizabeth:      So if someone is like that does that, there’s that really tiny business owner at the very very beginning, how do you recommend people keep track of things.  Cause they don’t want to have to go out and buy QuickBooks or something really complicated in the beginning?

Kristine:         Right.  If you don’t want to buy QuickBooks, if you’re already using Quickens they do have Quickens Home & Business which can help you keep track of your business activity.  I really like spreadsheets.  I used Excel spreadsheets for most of my business bookkeeping.  I eventually converted to QuickBooks because it’s easier for tax purposes but for day to day bookkeeping, I used spreadsheets and I know a lot of people that will also just use pen and paper.  And there’s a lot of worksheet floating around in the internet that can help you keep track of your income and expenses just using pen and paper.  So it really doesn’t matter what method you use as long as you do it.  So you just need to come up with a method that will actually do each week or each month to keep your bookkeeping up to date.  That’s the important thing.

Elizabeth:      Yeah, cause I see people where they’ll start out a very small business and they’ll go ahead like try to buy QuickBooks and do everything right but its so complicated cause its such a powerful program that they don’t do it.  It defeats all purpose.  You’re better off with a calculator and a piece of paper.

Kristine:         Yep, I’m guilty of that as well.  That’s why I like to use spreadsheets for my day to day bookkeeping and then I’ll enter it all in QuickBooks later or hire somebody to enter all in the QuickBooks later.

Elizabeth:      Yeah.  Yeah.  So you know let’s say someone has kept track of it in some ways, shapes or form.  They used some bookkeeping systems whether it’s a pen and paper or spreadsheets or Quickens or QuickBooks and they’re sitting there with you with their taxes, how do you start getting ready.  You have all this data, all this information or hopefully not maybe they just have a shoebox full of receipt.  What stuff do you recommend people starting to take to get ready to do that?

Kristine:         Well the most important thing again I hate to keep sounding like a broken record but keep good records, update them on a regular basis, don’t wait until April 1st to update your bookkeeping and hope of filing your tax return by April 15th.  That’s a big mistake because you’re more likely to make mistakes and miss deductions.  So figure out which method can of work best for you and then do it on a regular basis.  I know you have a money meeting that you do every Monday morning.

Elizabeth:      Right.  Yep.

Kristine:         That’s a perfect way to do this.  Even whether you’re keeping it up yourself or you’re hiring somebody to do it, just have a system in place.  And then also make sure you have separate accounts for the business and personal use.  Again this is so that you don’t make mistakes and you don’t miss any deductions.  And then you want to review your profit and loss before the end of the year.  Again don’t wait til tax time because if you wait til after the end of the year then you’ve lost a lot of tax planning opportunities.  So get your books up to date, review your profit and loss before the end of the year.  If you get a profit and you know you need to hire, excuse me, you need to buy some equipment or software for the next year then that’s an opportunity to buy that now to reduce your profit or to set up a retirement plan or make other decisions like should you incorporate your business.

Elizabeth:      And actually I want to go back with the hobby business issue.  I know like my dad has a business or actually it’s the same business but in the beginning he always made sure that he zeroed out at the end of the year.  So he kept good record.  He wasn’t keeping records like a hobbyist.  But he was running it like a hobby in a sense that he wasn’t trying to make a profit.  Then he finally get to the point where he actually was making a lot of money in it so he needed to be a real business and pay taxes cause he couldn’t spend it all inside the business.  Should other people who have this kind of side business should they try to run it as a hobby and try to zeroing it out.  I mean what point do you need to just say yes this is a real business; I’m going start paying taxes.

Kristine:         Well, unless it’s truly just a hobby, you probably want to make a profit.  So the key then is to make sure that you’re getting all the tax deductions you’re in entitle to while still making a profit.  You don’t really, I mean the IRS if you are actually classified as a hobby it’s not necessarily a good thing because then you may lose the ability to deduct some of your expenses because hobbies have to file differently than businesses.  Hobbies can’t deduct expenses greater than their income and hobbies lose the ability to deduct expenses if you don’t itemize your deductions on Schedule A.  So it’s actually best to treat it as a business from day 1 because even if you have a loss as a hobby, you don’t get to deduct that loss against other income.  As a business owner you do get to deduct that loss against income. 

Elizabeth:      Right.  Against your day job or your spouse’s day job.

Kristine:         Right.  Which can be a huge benefit like my first year in business, I opened my business in the middle of the year so I have half the year of salary and then I have half a year of business income which happened to be loss, which is you know pretty typical for businesses in their first year.  So guess what I get to deduct that loss against my salary that I had for the first half of the year and my taxes were nothing the first year I was in business.  So if you try to run your business as a hobby then you loss the ability to take that losses of deduction against your wages so it really benefits you to treat the business as a business from day 1.  So I rarely tell someone to treat it as a hobby.

Elizabeth:      So we got about 2 minutes for our first break.  I know a lot of people that we know and have independent contractors to work for them.  They maybe virtual assistant, they maybe someone you hire to like do a website for you, there’s a lot of different things you can do so they’re not employees so we know we don’t have to do all the employee stuff but there’s sometimes where you do have to file things for this people.  When does it cross the line when you have to start keeping track of things for them?

Kristine:         Right when they earned $600 or when you pay them $600 for services, you need to file a 1099 miscellaneous for them.  So and when you first hire somebody you may not know if you’re going to owe them more than $600 during a calendar year so what you should do is go ahead and get their social security number from day 1 and you do that by having them complete a form W-9.  And again I would do that from day 1 because a lot of people will end up paying a virtual assistant or maybe an affiliate person more than $600 and then they’ll be like, oh my gosh I don’t have their social security number.

Elizabeth:      Yeah and it’s the end of the January, you’re trying to get all this things out the door.

Kristine:         Right. And then they can’t get to social security number and then you’re subject to fine if you don’t have a social security number so what I’m telling client is to get that W-9 from day 1.  Don’t send them a paycheck until you got that social security number.

Elizabeth:      Yeah that’s a great idea.  Okay, we’re ready to go to our first break.  Everyone after the break, we’ll still be talking with Kristine and talking about some more tax tips for online business owners.  So stay in tune for that after the break.

Elizabeth:      Welcome back everyone.  It’s Elizabeth Potts Weinstein your host for the Wealth Spa Radio Show and we again have Kristine McKinley on.  We’re talking about tax tips for online business owners.  I want to talk a little bit about deduction and specifically about the home office deduction cause I know a lot of small business owners working out of our house or at least partially working out of our house and I know a lot of people are afraid to take that tax deduction because people think we’ll if I take it then I’m going to get audited for sure.  You know when should you take that deduction?  Is it true that that’s like a ref flag?

Kristine:         Well here’s the thing with the home office deduction.  As a small business owner especially if you’re a Schedule C filer, you’re already a red flag.

Elizabeth:      Yeah.

Kristine:         So but you wouldn’t not report your income or not be in business just because you know it says a red flag to be a sole proprietor.  So why would you not take a deduction that can save you hundreds or thousands of dollars in taxes just because someone says it’s a red flag.

Elizabeth:      Right.

Kristine:         That’s my theory.  So if you qualify, then you should take it.  And by qualifying it needs to be your place of business and you need to use it regularly and exclusively for business.  So it should be like a separate room in your house like a spare bedroom is a great home office because you’re using it just for your business.

Elizabeth:      So what about the desk in the corner of the room?

Kristine:         It depends on which room it is.  But a good example again is the spare bedroom, you can use it for a spare bedroom in an office and what you’ll do is measure the area that you’re using it just for the office.

Elizabeth:      Okay.

Kristine:         A bad example using your dinning room because that is a common room that’s definitely used for other purposes.

Elizabeth:      And the dinning table for instance, if you’re using the dinning room table, you can’t even figure out what’s square foot if you’re going to use it because you do more than one thing on that table.

Kristine:         Right.

Elizabeth:      Right.  So you need to possibly segregate it.

Kristine:         Segregate it as much as possible.  A separate room is the best way.  If you can’t have a separate room and you just have part of the room, just make sure it’s not a common area like a dinning room or a living room and measure the area that you’re using just for business.  So you need to have some clear definition of the space.

Elizabeth:      Right.  Right and then its based like on square footage kind of percent, right, for the most of things.

Kristine:         Yes.  You want to measure the square footage that you’re using for office use and compare that to the total square footage of living space in your house.

Elizabeth:      Right and then it’s what ever percent and that’s what they’re using to calculate it.

Kristine:         Yep.

Elizabeth:      Okay.  So speaking of audit, when – all the small owners especially if you’re well like I’m an LLC but I’m still a Schedule C LLC so one person for tax purposes.  We’re on the highest level of potentially getting audited, what do we need to do to our returns to try to make it the least likely for us to get audited?

Kristine:         Well some of these tips are going to be really common sense but use a compute to file your tax return.  Don’t do a handwritten return.  Document everything.  Sounding like a broke record again but you have to keep good records.  Keep separate accounts.  Schedule C filers are notorious for paying expensive out of their personal account even if they have separate account.  So more than ever to audit proof your return, the best thing you can do is keep separate business and persona account both for checking and for PayPal.  Only take deductions that you’re qualified for, don’t embellish any.  A lot of people embellished the auto expense and file electronically.  And the last tip and this might surprise some of you is file your return late because most people that get audited file before April 15th.

Elizabeth:      Oh, cause I always have to file late.

Kristine:         You do.

Elizabeth:      I always get an extension.  Well a lot of years my husband is a partner in a law firm and they just can’t get all the partnership stuff done and so we don’t get it until after – we only get an estimated K1 in April and then when that happens I’m also behind in my stuff.

Kristine:         Right.

Elizabeth:      So yeah.  Hey it’s good to know.  I’ll try to tell my husband that we really file in October.

Kristine:         Yeah, it’s okay to file late.

Elizabeth:      Yes.   And I still pay taxes on time it’s just filing the return late.

Kristine:         Right.  You can send the payment in with your extension.

Elizabeth:      Yeah.  Yeah.  You don’t pay penalties or anything.  Its funny how many people I think don’t realize that, that you know if you’re a sole proprietor or someone who’s a sole proprietor for tax purposes that when you’re filing you can get an automatic extension in April so you don’t have to have a nervous breakdown on April 14th the day before, you can get an extension and you don’t have to – as long as you pay taxes, you’re fine.

Kristine:         Yeah that’s a bit misconception is that the extension extends the time to pay.  And that’s not true.  It only extends the time to file.  So if you’re filing an extension and you know you’re going to owe you better send money in that extension form.

Elizabeth:      Right.  Yeah.  This year we spent in too money we’re getting a refund now which I don’t like getting refund cause I’m going to give them an interest free loan but I like that better than owing taxes.

Kristine:         Right.

Elizabeth:      So speaking or talking about sole proprietors and things, a lot of people will ask about you know I’m a sole proprietor right now for instance and they’ll say should I be an LLC – corporation for tax purposes will that make a difference for me, will that – cause a lot of people think it would magically save the money in their taxes if they’re a corporation all of a sudden.  Is it matter or is it helpful for small business owners to do that?

Kristine:         It depends on probably the biggest factor is how much profit your business is earning.  Most people its better to start as a sole proprietor because you’re going have either a loss or a very small profit so it’s not really going to benefit you to incorporate.  But once you pass a certain number and there’s not a magic number but I usually recommend like $30,000 to $50,000 in profit then it could benefit you to actually incorporate as a small corporation.  If you were going to have employees and wanted to do employee’s benefits then it might even benefit you to do a C corporation.  But most of the people listening, its probably going to be a choice between a sole proprietor and LLC which can be taxed either as a sole proprietor or an S corporation or just a straight S corporation.  And one of the biggest tax benefit to becoming an S corporation is that you can take part of the profit out as salary which you’ll pay self employment or payroll taxes on but the benefit is that you can also take part of those profit out as a dividend which would not be subject to payroll or self employment taxes and that strategy alone can save you quite a bit in taxes.  

Elizabeth:      Right.

Kristine:         But it has to be very careful that you take out enough salary that the IRS doesn’t come in and reclassify that dividend as salary.

Elizabeth:      Yeah you know I see that a lot.  Where I see someone coming in especially when I was doing personal financial planning and they have a C corporation and they’re paying themselves a salary of like $3,000 a year.  Like you know I don’t think that you’ll have a job for $3,000 a year.  I don’t think everything else can be a dividend.  And so I think sometimes people do crazy stuff with that and they think that they can get out of paying it all together.

Kristine:         Right.  You have to be careful.  I’m afraid that that actually is going be taken away from us soon.

Elizabeth:      Oh yeah.  I think especially with the LLC kind of being vague about how that works, I think that’s all going to get change, you know what I mean.

Kristine:         I do too.

Elizabeth:      And standardized but who knows it depends on who wins election and all kind of stuff that they end up doing.  So we got a couple of minutes before the next break I wanted to ask you about when do people need to hire a tax person to do their taxes and when is it okay to just do it yourself.  Assuming that you’re okay with doing your personal taxes yourself you know or when is it good to use software program like TurboTax or one of these things versus hiring a person to do it?

Kristine:         Well if you’re a small business and you’re like a sole proprietor just filing a Schedule C, TurboTax is a pretty decent program.  It’s going to give you and ask you questions and so it’s going to try to capture all of the deductions that you’re entitled to.  But the problem is the law is constantly changing and if you’re not aware of tax deductions or credit that you are entitled to TurboTax can’t ask you every conceivable question out there.

Elizabeth:      Right.

Kristine:         I mean they’re going to try to cover the most common deductions but they can’t ask you everything.  So if you’re not up to date on the tax law it is possible that using TurboTax you could miss a few deductions.  So I would say if you enjoy keeping up with the tax law and you understand taxes and you know what’s deductible for you then probably TurboTax is going to be sufficient.  But if that’s something you don’t like doing.  You don’t pay attention to the news when it concerns tax law then you should probably hire a tax professional to make sure that you’re not going miss any deductions that you’re entitled to.

Elizabeth:      Do people need to hire a CPA to do their taxes or does people who are just tax prepare or what should they look for when they’re looking for tax person?

Kristine:         I don’t think you necessary have to have a CPA but you definitely want to hire somebody who is familiar with your business type.  I think that’s probably a better criteria than what initial go after their names.  And I’m a CPA so you’d think I’ll be biased.  But it really comes down to does the person helping you with your taxes understand your business.  And what I run into a lot is there’s a lot of eBay sellers out there that cannot find a tax professional that understands PayPal fees and eBay fees.  So yeah in this case it’s more important to find somebody that understands your business more so than just being a CPA.

Elizabeth:      Right.  Or if someone they may be a wonderful CPA but all their businesses are brick and mortar kind of businesses who have inventory and you have an online business where you sell information products and services.  They’re used to doing a completely different kind of taxes. 

Kristine:         Right.  And if he’s a CPA a PayPal report, they’re going to be totally lost.

Elizabeth:      Yeah and PayPal reports are confusing in general.

Kristine:         They are.

Elizabeth:      Yeah, it is [27:43] and they’re like what.  Yeah those things are just from being familiar and its actually going to cost you a little bit more money cause you got to pay that other person to get up to speed.

Kristine:         Right so what I do with a lot of people, I have a lot of clients that like to file their own tax returns and I don’t have a problem with that but what I’ll do is I’ll have a consultation with them like 30 minutes or an hour just to make sure that they are aware of all the deductions and credits that they’re entitled to.  So that gives them the information and the confidence to file their own tax return.

Elizabeth:      Right.  Right.  Alright before – we have about 2 minutes our next break, I want to give you a chance to share with everyone your website and how they can get more information from you.

Kristine:         Okay.  I have a blog setup just for online business owners and providing tax tips for them and it’s located at internetbiztaxtips.com and that’s pretty much an informational blog.  There’s tons and tons of articles for you to read so you can find out all kinds of information about taxes on there.  And then I also offer a couple of e-Books and audio program and I even offer consulting like I mentioned earlier as people have more question or need more handholding. 

Elizabeth:      Okay great so its onlinebiz like B-I-Z taxtips.com.

Kristine:         That’s one way to get there.

Elizabeth:      Okay.

Kristine:         The other way is internetbiztaxtips.com.  Both of those addresses will get you to the same blog.

Elizabeth:      Okay good, smart girl.  You get all the spelling and all that stuff.  Alright we’re about ready to go to our next break.  So thank you so much for being on the show Kristine today.

Kristine:         Thank you for having me.

Elizabeth:      Great so everyone after the break we’re going to be talking about tax id number and when do you need a tax id number when do you not need one yet.  So stay in tune for that after the break.

Elizabeth:      Welcome back everyone.  This is Elizabeth Potts Weinstein your host for the Wealth Spa Radio Show.  Sorry I’m eating my words for a second.  Just want to share with you again the website for Kristine McKinley our expert in tax tips for online business owner especially if any of you is selling stuff on eBay, you can go to internetbiztaxtips.com, that’s internetbiz, B-I-Z, taxtips.com.

                        Alright let’s get into the question this week.  This is one of the most popular articles on thewealthspa.com online magazine site and I get this question a lot from people.  Here in the United States, you have something called an employee identification number or a tax id number for a business.  Now right now as a human being here on the United States, you have a tax id number which is called your social security number.  And that’s what you used to identify yourself for taxes and for the social security office as well as all over the place and there’s a gazillion other places.  Well if you have a business it doesn’t have a social security number.  Now if you have sole proprietor business where you and the business are the same thing, the default tax id number for the business is your personal social security number.  Now once you incorporate a business or even become an LLC, the business has kind of its own entity and needs its own tax id number.  But there’s other situation where you may need.  So the idea is is that this comes up a lot for people because someone will ask them for their tax id number or tell them they need it and then they’ll do like I don’t want to have to incorporate or I don’t want to be an LLC.  I’m a sole proprietor.  I like being it.  I don’t want to have to get a tax id number to do business with you or to be an affiliate or to be a virtual assistant with your company.  And so they’ll get very frustrated.  What I want to tell you is is that yes there are – if you are incorporated, if you are an LLC or if you have an employee you definitely have to get a tax id number or an employee identification number also called an EIN.  But any business can always get a tax id number.  It does not cost anything.  It is free.  It isn’t too instantaneous and it doesn’t mean anything in the sense of you’re not incorporated and it doesn’t do anything complicated to your life.  All it is, is instead of using your social security number to identify your business for tax purposes and other financial purposes, you’re using an employee identification number.  You’re using that tax id number.  I recommend that all business owners get one of these.  And the reason is, is that for privacy purpose, you don’t want to be getting out your personal social security number all over the place and every time you fly to be an affiliate on someone’s website, every time you have a contract with someone to be a virtual assistant for them, every time you fill out an application for a loan or for a credit for your business, you’ll be giving that your social security number out over and over again.  So you want to minimize that.  So its great to have that number that tax id number for your business to use instead of your own personal social security number.  Also in some of the dealings that you have especially if you’re a virtual assistant, if you’re an independent contractor, it gives a little bit of kind of easy credibility to have a tax id number.  You look like you have your act together a lot more.  It’s a cheap and easy way to be much more of a grown up business to have that tax id number as opposed to just kind of using the default social security number.  It also helps you to keep things separate.  So when you’re doing things for your taxes, when you’re doing your bookkeeping, when you have different accounts, it helps you somewhat mentally as well logistically keep your personal stuff with your personal social security number over on one side and the business stuff with your business employer identification or tax id number over on the other side.  So for pure kind of logistical purpose I highly recommend doing it.  Now one of the reasons I recommend doing this is because it’s free.  It doesn’t require anything.  It literally is free.  It’s not just low cost.  All you have to do is go to the website for the IRS.  So go to irs.gov and one of these things you can click on at the top, there’s like a top little menu is business.  You can go to the business section of the IRS’ website.  Now over on the left hand side is a whole bunch of different options.  And one of those options is employer id numbers, maybe its called employer identification numbers.  You click on that and you get to a screen that explains what the EINs are.  What tax id numbers are?  And also right there you can do an application online and you literally do it online and get your number instantaneously.  Then that’s the number you’ll use for your bank account when you’re filling for a credit card application.  When you have a contract to someone, when you’re an independent contractor and you’re filling out the forms so you can get your 1099, when you’re going to be an affiliate for someone on the website that is the number that you’ll use.  Now how exactly – if you are an LLC, it could get a little more complicated, I’m not going to go on that explanation now cause a lot of you aren’t.  When you’re an LLC and you’re a one person LLC you actually may need two id numbers.  Why they have that is really kind of insane.  But you may.  I’m not saying that to confuse anybody but if you are a one person LLC, just realize that you need to go – when you go on the IRS website for employer identification numbers, it will tell you that.  So don’t be surprised.  So do you need a tax id number or employer identification number for you business?  The short answer is is if you’re a corporation or an LLC yes.  If you have employees, yes.  Everybody else go ahead and get one anyway because it’s free and cheap and easy.

                        Okay so that is the question for this week and what I wanted to go into next.  We’ve haven’t gone to the next break yet so I’m going to go ahead and start talking about is our next tip in the Entrepreneur’s Success Tip for the Week series and this is the fifth in our series on the Art of Social Networking.  This tip is on the Art of Connecting.  So just kind of going back and recap what we’ve been talking about.  Social networking, where here we’re talking about Facebook, MySpace, Twitter or LinkedIn and all these places where you can network just like in real life networking where you can network online.  There’s tons of website to do this.  And one of the big misconceptions that people do and it’s really kind of interesting is they’ll be pretty good at networking in real life.  They’ll know what to say and how to be at the local Chamber of Commerce or eWoman Network Meeting and they’ll know the kind of rules and culture of doing it.  But then as soon as they go online its like all their knowledge on how to network completely flies out of their head because they’re maybe intimidated by the technology or they’re impressed by how many people they can network with at once and start forgetting all those rules and doing completely inappropriate things or not using it for the wonderful purposes that you can use it for.  The thing is that social networking is the same thing as networking in real life.  Networking in real life, you’re meeting with people one on one or in very small group.  You’re asking them about themselves.  You’re learning about them both their needs as a business owner as well as just about them as human being.  You developed relationships.  You talk not just you know when you’re at a lunch with someone, you don’t just chat business.  You also talk about what’s going on in that restaurant right now.  You may talk about politics or something that’s going on in the news, you may talk about your kids, you may talk about your last vacation.  You developed a relationship and a connection with someone or a group of people.  All those skills and that culture of networking in real life also apply to networking online in these online social networks.  The different is and the really cool part of networking online is that you’re not just doing it one on one or one on four in small groups.  You’re doing it one on a hundred, one on a thousand, one on a million.  So you’re leveraging the same thing to literally tens of thousands potentially millions of people.  But the same rules apply and it’s interesting when people forget.  You know why would you talk about personal stuff online?  Well for the same reason you talk personal stuff in real life.  You know why would you not just starts sending out these spam messages to every single person on Facebook?  Well would you do that in a real life business meeting?  Would you do that in a real life Chamber of Commerce event?  You know stand around and just hand up a business card to every single person in the room without having a conversation with them.  How useful would that be, or wouldn’t be.  So you wouldn’t want to do that online either.  So anyway the idea of this five part series is that the same rules apply.  It’s a little bit different because you’re online.  But it’s generally the same thing.  So don’t be intimidated by the technology.  So the first four parts of the series the Art of Social Networking is the Art of the Conversation, the Art of the Relationship, the art of Being Naked and the Art of Sharing which is what we did last week.  If you miss any of those parts in the series, you can always go to thewealthspa.com and listen to any of the prior shows to get that information.  Its all tie in to the same kind of team which is the same stuff that applies offline applies online.

                        So today we’re talking about the Art of Connecting and very much like the Art of the Relationship, the Art of the Conversation, the Art of Connecting on a social network is really some of the core of networking.  Now part of what is the connection is you connecting yourself and/or your business to other people.  It could be to prospects right, to leads to people who may potentially buy something from you.  It may also be to other business owners.  It may be to centers of influence in your industry.   And this is something that people forget sometimes.  We remember this in real life but we forget about this online.  When you’re networking on line, you’re not just looking for people to buy your stuff, are you?  You don’t just do that offline.  When you work online, you’re also looking for people who will refer other people to you, who will introduce you to someone much higher up in the totem pole.  You want to have a connection with people who themselves have a lot of connection and that’s one of the most amazing things about doing it online is that you can easily connect to people who are centers of influence who in real life would just be difficult for you to ever get a meeting with logistically.  Maybe they’re very busy.  They’re in a different city or part of the country or part of the world but online you can make connections with them and people that they’re connected to in a relatively simple ways.  So thinking about as you’re going to this social networking looking at okay who can I be connected to for prospects or leads as well as who I can be connected to whose are centers of influence who are people who themselves are connected to a lot of people.  Who are other business owners who maybe refer things to me or I can refer people to them because we target the same target market but provide different solutions for people or address different problems.  Also think about taking it to the next level.  So there’s a couple of different ways you can take connecting to the next level.  One of them is about connecting people other people with each other.  And there’s a couple of different ways to do that.  So connecting people by making introduction to two different people.  So may know one person who you definitely think would be a great connection for someone else.  Making that introduction.  Doing reviews.  Doing recommendations.  Doing testimonials for different people.  That’s a great way to easily make connections to people and also kind of develop your influence in the industry.  Hold on seconds I’m doing something to my computer and I’m freeing something up.  Part of also making this connection is forming groups or social network.  So thinking about your online in Facebook or you’re online in MySpace or one of this other social network.  Looking at all the people who follow you what do they have in common and what do they have in common with each other.  Alright I actually have gone over for this break so I’m going to go to break right now and then we’ll come back and finish up the last part of the Art of Social Networking and the Art of Connecting.   So stay in tune for that after the break. 

Elizabeth:      Welcome back everyone.  Again it’s Elizabeth Potts Weinstein, host of the Wealth Spa Radio Show and before the break I was speaking with you about our Entrepreneur’s Success Tip for the Week which this week is about the Art of Connecting.  It’s the fifth in our series in the Art of Social Networking.  And right before the break I was talking about group and setting up your own social network.  So in the Art of Connecting as I said it’s not just about connecting you with people who want to be connected with.  It’s about connecting them with each other.  So it maybe about recommending people both in general as well as to other people who they specifically maybe interested in.  It’s about testimonial for people who’ve been influential to you.  About making specific one on one introductions but another way you can take it really to the next level is to create groups or even social network of your own.  So for example, on Facebook is one of the places where I’m active and someone who I know on Facebook set up a Facebook group and actually a companion social network for people who are interested in doing joint ventures with each other.  And it’s still pretty small.  It’s kind of like I think the group online is like a 100 or something people.  The social network has couple of dozen people but this is brand new.  It was like something she started this week.  This is a great example of taking the people she is friends with online on Facebook, the people that she know and helping them all connected with each other.  Now of course from a karmic perspective, this is a great thing to do.  It’s helping out a lot of the people who are following you.  From a perspective of helping yourself, what it’s going to do is it’s going to make you be the head of that group, the head of that network.  You become a center of influence.  And as that center of influence more and more people wants to be connected with you.  And you’re putting yourself up there as an expert connector as one of the higher people in your industry.  So if you have a fair amount of connections, a fair amount of friends online and you know all these people and you know that they should know each other because they have the same kind of target audience, because they do the same kind of work, because they have the same kind of temperament.  Whatever it is think about how can I group them together and it doesn’t have to be complicated like a full on social network.  It could just be a group on a social network that you’re already on.  You could make group on Facebook.  You can make group on LinkedIn.  Most of the social network have group that you can easily [51:48] and invite people to join.  So think if you have decent number of people and I mean you know even as little as 50 or 100 people, if you’re connected with them already, what do they have in common and what kind of group can you form there.  And don’t forget this can go viral.  So you invite those 50 people.  Each of them invites another 5 or 10 people and all of a sudden you have 100 of people involved in your little social network or your group inside of social network.  So that’s this week’s tip Entrepreneur’s Success Tip the Art of Connecting.  So connecting both yourself, the people as well as other people to each other.

                        So next week on the show, actually I don’t have the guest in front of me and I know we have a guest but I totally can’t remember who it is.  That’s not very helpful is it?  We’ll be doing another tip on the Art of Social Networking.  If you’re not going to remember when and where to listen to the show, you can always go to thewealthspa.com, that’s thewealthspa.com, there you can sign up to get shows deliver to you automatically by email, rss feeds or via iTunes.  You can also listen to past shows, right there online get the links or any of the information on the guest that we talked about, talked with on that website.  And a lot of the transcripts to the past show are up there online.  So if you like to read more than you like to listen, you can go right there.  Now also on thewealthspa.com we have tons of articles and other resources.  It’s an online magazine.  There are videos.  There’s an article posted just about everyday at least every business days some of this more often on areas on both law and finance as well marketing, a business management, lets see law, finance, marketing, business management, mindset, tons of different resources there online for you.  And we’re going to be adding even more category as times go up.  The whole idea of the Wealth Spa is promoting holistic wealth so tons of free research is there for you.  Also if you heard me talk about money meetings, we did mention this on the show earlier, on thewealthspa.com you can get a special report about how to use money meetings to help you manage the finances and the cash flow of your business.  And then of course, if you want more information about my book “Grow Up! Strategies” or any other products or anything else associated with the Wealth Spa, you want to learn how to be on the show either as guest expert or have your question answered on the show, go to thewealthspa.com and you can ask a question to be answered on the show or find out how to be a guest expert.  So it makes it easy just go to one place, thewealthspa.com.  So again, I wanted to give you the link for Kristine one more time its internetbiztaxtips.com if you want to get those tax tips from her or you can just go to thewealthspa.com to get that information.  So thank you all very much for listening to today’s show and I look to speaking with you next week.  Ba-bye.             

 

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